CLIENT MONEY PROTECTION SCHEME LAUNCHED TO PROTECT LEASEHOLDERS
With around £1.3 billion in unprotected client funds being held by UK managing agents according to calculations by ARMA (the Association of Residential Managing Agents), there is a clear need for greater protection of leaseholders’ money. Now ARMA has launched a first of its kind CMP (Client Money Protection) insurance policy in partnership with NFU Mutual, exclusively available to ARMA members.
CMP schemes are expected to become compulsory for managing agents in the near future but compared to lettings agents, for whom CMP will be mandatory from April 2019, similar regulation for managing agents has lagged behind. However, given that the sums held by property managers are significantly larger than those held by lettings agents, the need for client protection is all the more pressing.
On average, property managers hold £6.2 million in leaseholder money and larger firms could be holding in excess of £100m, whereas the average letting agency holds around £500,000 at any one time. Money held is made up of clients’ service charges and reserve and sinking funds, all held in trust in individual client accounts. It is estimated that 40% of all managing agents have no CMP in place, meaning that money would not be insured should theft or misappropriation take place.
Now ARMA is offering its members the first CMP policy designed specifically for the block management sector offered through NFU Mutual, underwritten by Royal Sun Alliance Group. Previously the only CMP schemes available were levy schemes, where payments from all members are held in a central pot, from which money for any claim is paid out, meaning cover for all members is suspended when the pot runs out. In creating a policy backed by a large and respected insurance company, ARMA hopes to bring long-term peace of mind to property managers and leaseholders.
Dr Nigel Glen, CEO of ARMA comments: “Given the large sums of money that property managers are dealing with having adequate cover is vital, which is why it was important that we found a CMP solution that was fit for purpose. The current CMP schemes are not designed to offer the level of protection required within our sector. We are pleased to introduce a straightforward and cost-effective CMP policy so that ARMA members can get ahead of the curve and ensure they have protection in place before legislation comes in. We want all managing agents and leaseholders to have confidence that their money is safe.”
Over the past year ARMA has been proactively lobbying government on CMP and the benefits that making it mandatory will bring to everyone in the residential block management sector.